Plaintiffs National Small Business United, a trade association representing over 65,000 businesses, and Isaac Winkles, a real estate manager, challenged the Corporate Transparency Act (CTA) in federal district court. The CTA, enacted as part of the Anti-Money Laundering Act of 2020, requires corporations and limited liability companies to report the identities of their 'beneficial owners' to the Financial Crimes Enforcement Network (FinCEN). The plaintiffs argued the law was facially unconstitutional, claiming Congress lacked the power to enact it under the Commerce Clause and that it violated the Fourth Amendment. The district court granted summary judgment for the plaintiffs, ruling that the CTA regulated the non-commercial act of incorporation and lacked a jurisdictional hook linking it to interstate commerce. The government appealed, arguing the law effectively prohibits anonymous business dealings and regulates economic activity with a substantial aggregate impact on commerce.
Writing for the panel, Judge Braker began by addressing the Commerce Clause challenge. The court applied the 'substantial effects' test, which allows Congress to regulate intrastate activities that substantially affect interstate commerce. The court rejected the district court's view that the CTA regulated the 'isolated, discrete act' of incorporation. Instead, the court held that the CTA regulates entities after they are formed, requiring them to report ownership information while operating in the stream of commerce. The court emphasized that corporations and LLCs are commercial by nature, existing to pool capital and maximize profits. Because the statute is directed at active business entities and excludes inactive or non-commercial entities, it regulates economic activity. Furthermore, the court found Congress rationally concluded that anonymous corporate dealings have a substantial aggregate effect on interstate commerce. The court noted that Congress relied on findings that shell companies are used for money laundering and terrorism financing, which are crimes affecting interstate and international commerce. The absence of a jurisdictional element did not invalidate the statute because the regulated activity was economic in nature. Regarding the Fourth Amendment, the court applied the standard that a facial challenge requires showing that no set of circumstances exists under which the law would be valid. Citing Cal. Bankers Ass'n v. Shultz, the court held that uniform reporting requirements are not unreasonable searches. The CTA is a routine federal reporting law with limited scope, requiring specific data points like names and addresses. The statute includes privacy safeguards, such as limiting disclosure to specific agencies and requiring audits. The court distinguished this case from those involving arbitrary privacy intrusions, concluding the CTA's disclosure requirement is reasonable and sufficiently related to a legitimate congressional determination.
The decision reverses the district court's grant of summary judgment, meaning the Corporate Transparency Act remains in full force and effect. Reporting companies must continue to comply with the requirement to submit beneficial ownership information to FinCEN. The ruling clarifies that the CTA is a valid exercise of federal power under the Commerce Clause and does not violate the Fourth Amendment on its face. The case is remanded to the district court for further proceedings consistent with the appellate court's opinion, though the immediate legal obligation to report remains. The decision leaves open the possibility for as-applied challenges by specific entities that can demonstrate they are not engaged in commerce, but the general facial constitutionality of the Act is now settled in the Eleventh Circuit.